Federal Circuit Finds Board Cannot Rely on Own Expertise As Evidence In Contested Proceedings

In Brand v. Miller, 487 F.3d 862; 82 U.S.P.Q.2d 1705 (Fed Cir. 2007), Brand and Miller were involved in an interference related to a method of cutting veneer from logs.  Generally, to produce veneer, logs are first cut lengthwise into pairs of fitches, and each pair is mounted into a “staylog” of a veneer cutting machine.  Each flitch is mounted using “dogs”, which hold the veneer in place on the rotating staylog and allow the veneer to be cut from the rotating flitch.  Because each flitch is tapered due to the shape of the tree, conventional machines required that the butt ends be removed to have a roughly uniform shape. 

The invention in dispute centered on a machine which removes veneer from a tapered flitch, thus not requiring the removal of the butt end of the flitch.  Robert Brand, inventor for U.S. Patent Application No. 09/377,120 (the ‘120 application), and Thomas Miller, inventor for U.S. Patent No. 5,865,232 (the ‘232 patent), used a new type of dog to mount the tapered flitch onto the staylog.  Since the ‘120 application and the ‘232 patent contained the same claim, an interference was declared.

During the interference, Miller was the junior party and the Board denied Miller’s attempt to show an earlier invention date.  As such, Miller claimed that Brand derived the ‘232 patent from Miller’s earlier work.  Miller claimed that he had shown Brand a drawing of his work (exhibit MX2001) at a meeting on October 12, 1994, which was before Brand’s conception date, that did not show any dogs or holes in the flitch for receiving the dogs.  Miller also produced a fax (exhibit MX2002), which was sent to Brand on October 7, 1994 and shows a “bugle-headed screw dog.”  However, the only evidence indicating that Brand was informed of how the MX2001 and MX2002 drawings should be used together to form the invention was from Miller’s uncorroborated testimony. 

The Board rejected this testimony, but still found derivation based upon its own reasoning that “one skilled in the art … would have recognized [the] suitability [of the bugle-headed screw dogs] for securely supporting a tapered flitch in the position depicted in [MX2001].”  There was no support in the record, and the Board instead merely stated that “[t]he ability of the bugle-headed screw dogs to tightly clamp the flitch would have been readily apparent.”  In the alternative, and also without support in the record, the Board held that there was derivation because the MX2001 drawing alone showed the needed positions of the tapered flitch relative to a veneer-cutting knife since it was “clear that the position of the flitch is due to the fact that the dogging holes have different depths” and since “it is apparent that the flitch [not shown in the MX2001] is supported [in the required position].”

On appeal, the Federal Circuit analyzed the court’s findings under the Administrative Procedures Act, 5 U.S.C. §554 and §556-57, as required under the Supreme Court’s decision in Dickinson z. Zurko, 527 U.S. 150 (1999).  Citing In re Gartside, 203 F.3d 1305 (Fed. Cir. 2000), the Federal Circuit noted that most PTO proceedings are not “formal adjudications” governed by 5 U.S.C. §556-57 because most PTO proceedings allow applicants to obtain a new trial, de novo, under 35 U.S.C. §§145-146.  However, the Federal Circuit held that most PTO proceedings are still governed by judicial review as set forth in 5 U.S.C. §§701-706.  After reviewing the various review standards set forth in 5 U.S.C. §706, and noting that all reviews of Board actions are required by 35 U.S.C. §144 to be appeals “on the record,” the Federal Circuit held that the review was under 5 U.S.C. §706(2)(E).  The standard under 5 U.S.C. §706(2)(E) requires a determination of whether the agency decision was “unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute.”

Based upon this review, the Federal Circuit reviewed the Board’s findings to determine if the record revealed substantial evidence to justify the Board’s conclusions about derivation.  First, the Federal Circuit noted that, especially in a contested proceeding like an interference, the record must be closed.  Citing the Supreme Court in Baltimore & Ohio R.R. Co. v. Aberdeen & Rockfish R.R. Co., 393 U.S. 87, 92 (1968), the Federal Circuit held that an agency cannot rely on its own expertise in a contested case because, without evidence, any administrative decision “would become lost in the haze of so-called expertise.”  The Federal Circuit also noted that the interference proceedings themselves highlight the importance of an administrative record.  Based upon these rules of law and the regulations of the United States Patent and Trademark Office, the Federal Circuit held that agency expertise cannot substitute for evidence to meet the substantial evidence standard.  The Federal Circuit explicitly noted, however, that it is reserving judgment of “the extent to which the Board in ex parte proceedings is so limited.” 

Based upon this determination, Federal Circuit held that the Board’s reliance on its expertise was improper and that, other than Miller’s uncorroborated testimony that the Board also rejected, there was no evidence to show how one of ordinary skill in the art would have understood the drawings MX2001 and MX2002 or to show whether there was a communication regarding how the invention should be practiced.  Instead, the Board improperly substituted its expertise to fill in these gaps, and did not “anchor in the record” its conclusions.  As such, the Federal Circuit reversed the Board’s decision.

Impact on Patent Prosecution

While Brand explicitly only reflects contested proceedings and the need for evidence in such proceedings for purposes of review under the Administrative Procedures Act, it is likely that similar logic would be followed during ex parte prosecution.  Therefore, Brand is consistent with the above decisions relating to obviousness and the need for evidence (as opposed to unsupported conclusory statements) to substantiate a rejection.

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